Once Idealistic, Crowdfunding Is Now an Unholy Hybrid of Retail, Investment, and Risk
Monday, April 27, 2015
Dave Bogaty is a coffee junkie. He exclusively buys his beans from a small-batch roaster in Brooklyn and scouts out local varieties in every new city he visits.
So when the Massachusetts native and former Google software engineer saw a commercial-quality home espresso machine showcased on the “coffee@google” mailing list back in December of 2011, he immediately went to crowdfunding website Kickstarter to snag one for $250. ZPM Espresso, the maker of the machine, had raised nearly $370,000 in a matter of days.
Finally in January 2015, ZPM alerted backers the company had folded and “will most likely be unable to offer refunds,” according to an email reviewed by Quartz.
“This model is effectively financing without any obligation to the people giving you the money,” Bogaty says. “There’s no accountability.”
Kickstarter is perhaps the best-known platform in the fast-growing constellation of crowdfunding outlets—a catchall term used to describe a range of services, from websites offering backers early access to new products to sites that allow funders to make equity investments in startups and real estate projects. While they all tend to blend together in a loosely regulated pool of alternative finance, the basic idea is to provide an alternative to banks and venture capitalists and offer everyday consumers a quicker, more direct way to save, spend, and invest.